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Determinants of Foreign Investment in the Brazilian Stock Market

Author

Listed:
  • Walter Gonçalves Junior

    (FGV-EESP)

  • William Eid Junior

    (FGV-EAESP)

Abstract

The purpose of this paper is to identify determinants for foreign portfolio investment in the Brazilian stock market. From the viewpoint of the investors who have already allocated their resources in Brazilian Market, it was found that periods of greater local liquidity and lower correlation with developed markets promoted their activities (buys and sales); the Brazilian country risk (EMBI Br), domestic and external interest rates and recent past performance of the domestic market also showed as significant determinants for additional buys. For net inflows into the local stock market, as robust determinants were found the performance of developed markets and the domestic prime interest rate; the development of BM&F-Bovespa Stock Exchange, crisis environments, the recent Brazilian investment grade and the local diversification (in relation to a developed market) would be particularly relevant to the dynamics of foreign portfolio inflows in Brazil.

Suggested Citation

  • Walter Gonçalves Junior & William Eid Junior, 2016. "Determinants of Foreign Investment in the Brazilian Stock Market," Brazilian Review of Finance, Brazilian Society of Finance, vol. 14(2), pages 189-224.
    • Handle: RePEc:brf:journl:v:14:y:2016:i:2:p:189-224
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    More about this item

    Keywords

    foreign investment; determinants; Investment Decisions; International Finance;
    All these keywords.

    JEL classification:

    • F65 - International Economics - - Economic Impacts of Globalization - - - Finance
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • N26 - Economic History - - Financial Markets and Institutions - - - Latin America; Caribbean

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